MILAN — As head of the Bank of Italy for 12 years,
Antonio Fazio helped protect the country’s banks from foreign rivals,
making him popular among entrenched Italian bankers, but less so at European Union headquarters.

Now, three years after his
time at the helm of the central bank ended in scandal, he goes on trial
in Milan on Thursday, accused of rigging markets in order to keep
Italian banks in Italian hands.

Mr. Fazio, 72, worked at the
Italian central bank for 45 years and was governor until December 2005,
when he stepped down in the face of political pressure from the Italian
government and the European Commission, the executive arm of the European Union.

He
had been under attack since July of that year, when newspapers
published the transcripts of phone conversations between him and
Gianpiero Fiorani, the chief executive of a bank mired in a takeover
battle.

The case captivated the Italian public as well as the
country’s political and economic elite. Mr. Fazio had a lifetime
appointment as head of the central bank and a personal veto on all bank
mergers in Italy.

His power remained unfettered until he used it
— illegally, prosecutors say — to favor the takeover of Banca
Antonveneta by Mr. Fiorani’s bank, Banca Popolare di Lodi. At the time,
the Dutch bank ABN Amro was seeking to buy Banca Antonveneta.

After
Mr. Fazio’s resignation, ABN Amro eventually bought Banca Antonveneta,
although the bank was soon under Italian ownership again when it was
subsequently sold to Monte dei Paschi di Siena.

“This
is really the first time in Italy that somebody at this high of a level
has been charged with something this serious,” said Alberto Alessandri,
a law and finance professor at Bocconi University. He is representing
the bank, now called Banca Popolare Italiana, in the trial.

The
trial opened in October, but the judge suspended it until Thursday to
consider a motion by the consumer association Adusbef, which is asking
that the central bank and the Italian market regulator pay damages of
10 million euros for their lack of oversight.

Mr. Fazio could be
sentenced to as many as 12 years if he is convicted, although legal
specialists said a guilty verdict would probably not lead to any actual
prison time.

“The result of the trial will be fair and
presumably severe, but the problem is the execution of the penalty,”
Mr. Alessandri said. “He is old, and it is problematic to send somebody
of that age to jail in Italy.”

As part of a plea bargain, Mr.
Fiorani has collaborated with investigators. But the transcripts of the
telephone conversations between the two men seem to pose the most
serious challenge to Mr. Fazio’s defense.

“I just put my
signature on it,” Mr. Fazio was recorded as telling Mr. Fiorani in July
2005 in a midnight phone conversation regarding the final approval of
the takeover of Banca Antonveneta.

Mr. Fiorani replied, “I’ve got goose bumps,” and added, “I’d give you a kiss right now, on the forehead.”

Mr.
Fazio could not be reached for comment and has not spoken to the news
media for three years. Seventeen other people are on trial in
connection with Popolare di Lodi’s failed assault on Antonveneta, and
58 have reached plea agreements.

“Economic crimes like these are
extremely complex when you drill down, and it is very difficult to
prove guilt even when there is what seems to be irrefutable evidence,”
said Gabrio Forti, a professor of criminal law and criminology at
Universitŕ Cattolica in Milan.

The trial will probably last for at least a year, according to several legal specialists.

Though
experts agree that Mr. Fazio protected Italian banks from takeovers by
foreign rivals, the dispute is over whether he used illicit means to
achieve his goal.

The trial promises to offer much theater, with
the list of witnesses submitted by the prosecutors including Mr.
Fazio’s successor, Mario Draghi, and Cesare Geronzi, chairman of the
investment bank Mediobanca and one of the most powerful figures in
Italian finance.

As governor of the Bank of Italy, Mr. Draghi has
taken an antiprotectionist stance, encouraging bank consolidation and
removing barriers to foreign takeovers. His actions led the European
Commission to drop its complaint against Italy for hindering takeovers
by foreign banks.

Mr. Fazio, meanwhile, has begun efforts to
rehabilitate his reputation. At the end of October he wrote an
editorial for Il Sole/24 Ore, the Italian financial newspaper, in which
he laid out the main thoughts of his just-published book,
“Globalization, Political Economy and Social Doctrine.”

Mr.
Fazio, who was himself a regulator without any oversight, has argued in
the past for the need for more regulation. Unwittingly, he might have
achieved just that.

“Both this scandal and lesser scandals have
led to more oversight by regulators,” Mr. Forti, the criminal law
professor, said. “Fazio has certainly seen his image damaged, but not
as much as would have happened in other countries because of cultural
reasons and also because in recent years the Italian judiciary has been
accused of carrying out politically motivated trials. Even though it’s
a false accusation most of the time, it has contributed to lessening
the weight of guilty verdicts.”

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